Russia’s Putin threatens Ukraine with court over $3 billion debt

9 Dec 2015 | Author: | No comments yet »

Putin orders government to sue Ukraine if defaults on US$3 billion debt.

MOSCOW/KIEV (Reuters) – Russian President Vladimir Putin told his government to take Ukraine to court if it did not repay a $3 billion (£2 billion) Eurobond while other Russian officials blasted the International Monetary Fund for softening its lending rules to help “crooks” in Kiev. In a televised interview on Wednesday, Medvedev said he thought Moscow and Kiev had “almost no chance” to come to an agreement on the outstanding debt. “But we will keep trying to reach an agreement until the very end of December,” Medvedev added. That means financial aid to Ukraine may continue after non-payment of the $3 billion Eurobond Russia bought in December 2013 from the government of Ukraine’s then president, Viktor Yanukovych.

The IMF’s change in rules embroiled the lender deeper in the nearly two-year conflict between the two neighbours, with the Eurobond becoming its focal economic point. Ukraine is barred from redeeming the note, due Dec. 20, in full under a $15 billion restructuring accord reached with commercial lenders. “We won’t put up with this,” Medvedev said. “We’ll got to court.

Meanwhile the IMF on Tuesday changed a rule that would have blocked its financial aid program to Ukraine in the event the country defaulted on its debt to Russia. We’ll seek default on the debt and will seek default on all of Ukraine’s obligations.” Ukraine’s Finance Minister Natalie Jaresko said she wouldn’t comment on Russia’s “political statements” on the debt, referring to Medvedev’s remarks. Last week Prime Minister Arseniy Yatsenyuk, who said Ukraine is ready for a court battle with Russia, reiterated that his government won’t repay the debt to the Kremlin without a restructuring. Russia could try to take legal action to keep Ukraine from making payments on its other international bonds, as holdouts in Argentina’s restructuring have done. He said he doubted Ukraine would redeem the note. “I have the sense that they won’t pay it back because they are crooks,” Medvedev said in an interview on state television. “And our Western partners not only don’t help but also interfere.” “It allows us to understand that if we are included in this policy and we unfortunately are not able to restructure the so-called Russian Eurobond, then the doors to IMF loan financing will not be closed to us,” she told journalists. “The precedent for us is absolutely not acceptable, and the main thing is that it is quite dangerous because we have created a dangerous precedent for permitting the non-payment of sovereign debts.

Andrew Wilkinson, a partner at law firm Weil, Gotshal & Manges LLP, who worked on Ukraine’s bond restructuring, has said provisions were made to block Russia from going down that route. Ukraine’s dollar-denominated bonds climbed on Wednesday after the IMF’s policy change increased the likelihood of the country receiving more aid from the fund. Russia, which Western governments say continues to support separatist rebels in Ukraine’s east, says it is country-to-country official debt outside the scope of Kiev’s deal with private creditors.

Russia set a deadline of Tuesday for a response to its offer, saying the impasse can only be resolved “in the framework” of the IMF-led program of assistance for Ukraine because the nation lacks the financial means to pay. Russia cannot and will not receive different restructuring terms from those that other creditors have received,” he said. (Additional reporting Christian Lowe, Darya Korsunskaya, Katya Golubkova, Anastasia Lyrchikova and Denis Pinchuk in Moscow and Alessandra Prentice in Kiev; Editing by Richard Balmforth)

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